Congressional Analysis Finds Health Care Plan Excise Tax Would Hit 34 Percent of Group Plans in 2019

By Staff Report

Oct. 23, 2009

About one-third of group health care plans would be affected by a proposed 40 percent excise tax on insurers and third-party administrators offering the highest-cost health plans by 2019, according to a congressional analysis.

U.S. Rep. Joe Courtney, R-Connecticut, who requested that the Joint Committee on Taxation analyze the provision in health care reform legislation that the Senate Finance Committee passed last week, released the results Tuesday, October 20.

Under the provision, the excise tax would apply to that portion of a group health care plan premium that exceeds $8,000 for individual coverage and $21,000 for family coverage. For plans covering early retirees and employees in certain high-risk professions, the tax threshold would be $9,850 for individuals and $26,000 for families.

In 2013, the first year the tax would be imposed, the Joint Committee on Taxation estimates that 19 percent of plans offering single coverage and 14 percent of plans offering family coverage would be affected by the excise tax.

However, the analysis found that the percentage of plans affected would increase steadily in succeeding years. By 2019, 34 percent of plans offering single coverage and 31 percent of plans offering family coverage would be subject to the tax.

Under the measure, the tax thresholds would rise in tandem with the annual increase in the Consumer Price Index, plus one percentage point. However, the Joint Committee on Taxation noted that medical inflation is expected to increase even more and boost the percentage of plans affected.

While the tax would be paid by insurers and by third-party administrators in the case of self-funded plans, it is likely that costs would be passed on to buyers, according to the analysis.

“Generally, we expect the insurer to pass along the cost of the excise tax to consumers by increasing the price of health coverage,” the analysis said.

Of five congressional committees that have passed health care reform legislation this year, the Senate Finance Committee is the only one to include an excise tax based on cost of coverage.

The Congressional Budget Office estimated earlier that the provision would raise more than $200 billion over a 10-year period.

Filed by Jerry Geisel of Business Insurance, a sister publication of Workforce Management. To comment, e-mail

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